Asian stock markets are facing a significant downturn, with the Nikkei 225 in Japan dropping sharply and moving into correction territory, having fallen over 10% from its late-June peak. Taiwan's main index, heavily influenced by leading chipmakers, has also slumped due to the outsized role of AI demand in its earnings. South Korea's Kospi has seen dramatic intraday swings, with one recent session experiencing a temporary trading halt after plunging almost 6%, indicating fragile sentiment around high-flying tech shares.
This tech selloff is not solely attributed to AI hype. It comes amidst a backdrop of geopolitical flare-ups and elevated energy prices, which are making investors more cautious about growth. When multiple stressors like valuation fears, policy uncertainty, and geopolitics converge, equity volatility tends to spike, and Asia, being highly exposed to global trade and tech cycles, is particularly vulnerable.
Specific market movements include Taiwan's Taiex shedding 6.5% with chipmaker TSMC retreating 7.3%. Japan's Nikkei ended down 4.0%, with Advantest, Tokyo Electron, and SoftBank all sliding over 7%. The Kospi, after more than doubling in the first six months of the year, has lost about a third of its value since its June record, with chip giants SK Hynix and Samsung each giving up around 10% in one session. The Philadelphia Semiconductor Index has lost approximately 19% from its June peak, as investors question whether the massive sums committed to AI infrastructure can generate sufficient returns.
Despite strong earnings and healthy demand in some tech segments, analysts suggest that the AI rally had become a crowded trade, making it susceptible to corrections. While investors remain confident in the long-term outlook for AI, the current market action reflects a questioning of how much of that demand has already been factored into share prices, leading to a period of portfolio rotation rather than a fundamental doubt about AI infrastructure demand. Other markets like Hong Kong, Shanghai, Singapore, and Sydney also saw losses, though Hong Kong notably edged up 1.3% in one session as Chinese chip firms advanced.
